Update: Economic Recovery and Budget 2015 – Finance 6th November, 2014

 
  To ask the Minister for Finance the extent to which he expects economic recovery to benefit from budget 2015; and if he will make a statement on the matter.
 
REPLY.

The Government’s principal strategy for  economic and budgetary policy for the last number of years, has been to put the economy and the public finances on a more stable footing.  Through the implementation of substantial adjustments, significant progress has been made in restoring fiscal stability and economic growth.  The economy is on a firm recovery path and a steady improvement in the public finances is under way.

The macroeconomic and fiscal framework underpinning Budget 2015 was more favourable than anticipated. This was down to positive  economic developments over the summer, an increase in tax revenues compared to profile as well as a reduction in national debt interest costs.  This allowed the introduction of a package of income tax reductions and expenditure increases  amounting to €1,050 million in Budget 2015, or about 0.6 per cent of GDP.   This package is likely to have a positive short-run impact on aggregate demand in the economy compared to an alternative of no policy change.  The Budget package is estimated to have added 0.3 per cent to real GDP in 2015 and an additional  0.2 percentage points to employment growth.  

Details of the economic impact of the measures introduced as part of Budget 2015 are set out on page C.51 in the Economic and Fiscal Outlook 2015 document published with the Budget and available at   www.budget.gov.ie .  

In terms of the outlook, my  Department is forecasting GDP growth of 3.9 per cent in 2015. This is driven by a positive contribution from net exports on the back of economic growth in Ireland’s trading partners.   Domestic demand is set to contribute to growth as well, with growing employment and rising household incomes resulting in an increase in private consumption.   Over the medium term, GDP growth of about 3 ½ per cent a year is anticipated.